Item 2
ICICI Limited
Unaudited Consolidated Financial Statements
Prepared in accordance with US GAAP
Periods ended June 30, 2001 and June 30, 2000
ICICI Limited and Subsidiaries
Unaudited Consolidated financial statements
For the periods ended June 30, 2001 and June 30, 2000
Contents Page
Unaudited consolidated balance sheets 2
Unaudited consolidated statements of income 3
Notes to the consolidated financial statements 5
ICICI Limited and subsidiaries
Consolidated balance sheets
Rupees in millions, except share data
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At June 30,
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2000 2001
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Assets
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Cash and cash equivalents 16,844 21,525
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Trading account assets 29,126 15,821
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Securities
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Available for sale 8,145 10,417
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Held to maturity 1,162 1,172
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Non-readily marketable equity securities 5,019 8,014
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Venture capital investments 628 4,460
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Investments in affiliates 7,514 7,921
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Loans, net of allowance for loan losses,
security deposits and unearned income 535,181 622,878
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Customers' liability on acceptances 3,358 3,323
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Property and equipment, net 10,724 12,462
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Assets held for sale - 849
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Intangible assets, net 514 1,842
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Deferred tax assets 42 3,647
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Interest and fees receivable 14,781 13,851
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Other assets 23,851 25,106
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Total assets 656,889 753,288
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Liabilities
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Deposits
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Interest-bearing 1,475 5,950
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Non-interest-bearing - -
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Trading account liabilities 17,578 15,692
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Short-term borrowings 86,734 73,195
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Bank acceptances outstanding 3,358 3,323
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Long-term debt 425,961 523,395
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Other liabilities 39,424 43,972
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Deferred credit, net 1,580 -
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Taxes and dividends payable 8,156 11,757
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Deferred tax liabilities 42 818
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Redeemable preferred stock 735 716
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Total liabilities 585,043 678,818
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Minority interest 2 484
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Stockholders' equity
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Common stock at Rs. 10 par value: 1,600,000,000
shares authorized as of June 30, 2000 and 2001;
Issued and outstanding 785,311,548 and
785,345,448 shares as of June 30, 2000 and 2001,
respectively 7,845 7,848
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Additional paid-in capital 37,429 38,112
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Retained earnings 29,873 32,398
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Deferred stock compensation (25) (23)
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Accumulated other comprehensive income (3,278) (4,349)
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Total stockholders' equity 71,844 73,986
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Total liabilities and stockholders' equity 656,889 753,288
See accompanying notes to the consolidated financial statements.
2
ICICI Limited and subsidiaries
Consolidated statements of income
Rupees in millions, except share data
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Quarter ended June 30,
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2000 2001
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Interest income
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Interest and fees on loans 18,555 19,949
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Interest and dividends on securities 270 134
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Interest and dividends on trading account assets 832 733
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Interest on balances and deposits with banks 32 146
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Other interest income 75 33
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Total interest income 19,764 20,995
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Interest expense
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Interest on deposits 88 187
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Interest on long-term debt 13,404 15,358
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Interest on short-term borrowings 2,056 2,178
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Interest on trading account liabilities 362 310
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Other interest 1 11
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Total interest expense 15,911 18,044
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Net interest income 3,853 2,951
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Provision for loan losses 1,293 927
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Net interest income after provision for loan losses 2,560 2,024
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Non-interest income
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Fees, commission and brokerage 1,238 1,789
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Trading account revenue 123 997
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Securities transactions (408) (650)
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Gain on sale of stock of subsidiaries/affiliates -- 57
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Foreign exchange income/(loss 122 (140)
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Software development and services -- 431
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Gain/(loss) on sale of property and equipment -- 16
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Rent 58 76
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Other non-interest income 140 126
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Total non-interest income 1,273 2,702
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Non-interest expense
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Salaries and employee benefits 478 785
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General and administrative expenses 838 905
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Amortization of intangible assets 47 --
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Total non-interest expense 1,363 1,690
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Equity in earning/(loss) of affiliates 278 275
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Minority interest -- 27
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Income before income taxes 2,748 3,338
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Income tax expense 437 831
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Income before extraordinary items and cumulative
effect of accounting 2,311 2,507
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Extraordinary gain, net of tax -- --
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Cumulative effect of accounting principle, net of tax -- 1,265
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Net income 2,311 3,772
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3
ICICI Limited and subsidiaries
Consolidated statements of income
Rupees in millions, except share data
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Quarter ended June 30,
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2000 2001
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Reported Net Income 2,311 3,772
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Add: Goodwill amortization 47 --
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Adjusted net income 2,358 3,772
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Earnings per equity share (Rs.)
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Basic
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Reported net income 2.94 4.81
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Goodwill amortization 0.06 --
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Adjusted net income 3.00 4.81
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Diluted
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Reported net income 2.93 4.80
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Goodwill amortization 0.06 --
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Adjusted net income 2.99 4.80
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Weighted average number of equity shares used
in computing earnings per equity share (millions)
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Basic 785 785
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Diluted 785 785
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See accompanying notes to the consolidated financial statements.
4
ICICI Limited and subsidiaries
Notes to the consolidated financial statements
Basis of preparation
The accounting and reporting policies of ICICI used in the preparation of these
consolidated financial statements reflect general industry practices and
conform to generally accepted accounting principles in the United States (US
GAAP).
The preparation of consolidated financial statements in conformity with US GAAP
requires that management makes estimates and assumptions that affect the
reported amount of assets and liabilities and disclosures of contingent assets
and liabilities as of the date of the financial statements and the reported
income and expense for the reporting period. Management believes that the
estimates used in the preparation of the consolidated financial statements are
prudent and reasonable. The actual results could differ from these estimates.
Impact of recently issued accounting standards
Statement of Financial Accounting Standards (SFAS) 133, Accounting for
Derivative Instruments and Hedging Activities, as amended by SFAS 138,
Accounting for Certain Derivative Instruments and Certain Hedging Activities,
is effective for ICICI from April 1, 2001. SFAS 133 requires that an entity
recognize all derivatives as either assets or liabilities measured at fair
value. The accounting for changes in the fair value of a derivative depends on
the use of the derivative. Derivatives that are not designated as part of a
hedging relationship must be adjusted to fair value through income. If the
derivative is a hedge, depending on the nature of the hedge, the effective
portion of the hedge's change in fair value is either (1) offset against the
change in fair value of the hedged asset, liability or firm commitment through
income or (2) held in equity until the hedged item is recognized in income. The
ineffective portion of a hedge's change in fair value is immediately recognized
in income. A number of the derivatives entered into by the Company do not
qualify as hedges under SFAS 133 and accordingly have been recorded at fair
value with the changes accounted for in earnings. The initial transition
adjustments required to adopt SFAS 133 resulted in no income statement impact
but resulted in the adjustment in the carrying values of assets and liabilities
to the extent of Rs. 706 million.
In July 2001, the FASB issued Statement No. 141, Business Combinations, and
Statement No. 142, Goodwill and Other Intangible Assets. Statement 141 requires
that the purchase method of accounting be used for all business combinations
initiated after June 30, 2001 as well as all purchase method business
combinations completed after June 30, 2001. Statement 141 also specifies
criteria intangible assets acquired in a purchase method business combination
must meet to be recognized and reported apart from goodwill, noting that any
purchase price allocable to an assembled workforce may not be accounted for
separately. Statement 142 will require that goodwill and intangible assets with
indefinite useful lives no longer be amortized, but instead tested for
impairment at least annually in accordance with the provisions of Statement
142. Statement 142 will also require that intangible assets with definite
useful lives be amortized over their respective estimated useful lives to their
estimated residual values, and reviewed for impairment in accordance with SFAS
No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of.
The Company is required to adopt the provisions of Statement 141 immediately,
except with regard to business combinations initiated prior to July 1, 2001.
The Company has opted to adopt the provisions of Statement 142 effective April
1, 2001.
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Statement 141 requires that upon adoption of Statement 142, the Company
evaluate its existing intangible assets and goodwill that were acquired in a
prior purchase business combination, and to make any necessary
reclassifications in order to conform with the new criteria in Statement 141
for recognition apart from goodwill. Upon adoption of Statement 142, the
Company is required to reassess the useful lives and residual values of all
intangible assets acquired in purchase business combinations, and make any
necessary amortization period adjustments in the first interim period after
adoption. In addition, to the extent an intangible asset is identified as
having an indefinite useful life, the Company is required to test the
intangible asset for impairment in accordance with the provisions of Statement
142 in the first interim period. Any impairment loss will be measured as of the
date of adoption and recognized as the cumulative effect of a change in
accounting principle in the first interim period. Upon adoption, the Company
did not have any reclassification adjustment, amortization period adjustment or
impairment loss on intangible assets.
In connection with the transitional goodwill impairment evaluation, Statement
142 requires the Company to perform an assessment of whether there is an
indication that goodwill is impaired as of the date of adoption. To accomplish
this the Company has identified its reporting units and determined the carrying
value of each reporting unit by assigning the assets and liabilities, including
the existing goodwill and intangible assets, to those reporting units as of the
date of adoption. The Company has up to six months from the date of adoption to
determine the fair value of each reporting unit and compare it to the reporting
unit's carrying amount. To the extent a reporting unit's carrying amount
exceeds its fair value, an indication exists that the reporting unit's goodwill
may be impaired and the Company must perform the second step of the
transitional impairment test. In the second step, the Company must compare the
implied fair value of the reporting unit's goodwill, determined by allocating
the reporting unit's fair value to all of it assets (recognized and
unrecognized) and liabilities in a manner similar to a purchase price
allocation in accordance with Statement 141, to its carrying amount, both of
which would be measured as of the date of adoption. This second step is
required to be completed as soon as possible, but no later than the end of the
year of adoption. Any transitional impairment loss will be recognized as the
cumulative effect of a change in accounting principle in the Company's
statement of earnings. The Company is in the process of performing the first
step of the transitional impairment test.
Any unamortized negative goodwill existing at the date Statement 142 is adopted
must be written off as a cumulative effect of a change in accounting principle.
Upon adoption, the Company has written off unamortized negative goodwill of Rs
1,265 million as a cumulative effect of a change in accounting principle.
Deferred Taxation
The balance sheet does not include the deferred tax asset arising out of 'other
than temporary' diminution on investments charged to the income statement in
prior years. Inclusion of such asset could have a positive impact of upto Rs.
958 million on stockholders' equity at March 31, 2001. However, the exact
amount will be ascertained on evaluation of likely realization of the deferred
tax asset by the management. This change will be incorporated in the Form 20-F
as a correction of financial statements for financial year 2001, to be filed
with the U.S. Securities Exchange Commission.
END
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